PG agreement and finer points
Vaidehi Goyal | Mumbai
Many homeowners resort to allowing paying guests in their premises for monetary reasons. Having an agreement between an owner and a paying guest safeguards the interests of the homeowner. Listed below are a few salient features that a good agreement between a flat owner and paying guest, should contain:
• The agreement should state that the owner is allowing the paying guest the use of one bedroom for their use only on a temporary basis and on certain terms mentioned later in the document.
• The period of the paying guest’s stay should be mentioned clearly plus the amount to be rendered plus a contribution to other charges such as electricity bill and society charges.
• The owner may allot to the paying guest any of the bedrooms in the said flat for his/her use with a condition that the owner can change the allocation at any time during the term of the agreement.
• The paying guest should specifically confirm and agree that they have no right whatsoever to the said premises nor claim to neither be tenant / sub-tenant or licensees nor claim any other right whatsoever to the said premises.
• They Paying Guest may use the passages in the flat for access to the room and may use the kitchen for cooking their own food only provided that no disturbance whatsoever is caused to the use of the kitchen and passages and other portions of the flat.
• The Paying Guest shall not cause any disturbance at any time and may permit guests or any outsider to enter the flat only with the permission of the Owner.
• In the event that the paying guest misuses any of the facilities in the flat or causes any disturbance or delays in making payment of his charges, the agreement can be terminated and the owner is entitled to enter the room allocated to the paying guest to remove all the belongings of the paying guest and dispose of them.
• The paying guest will be responsible for any damage caused by them or by any other outsider who has entered the flat through them and to any of the furniture, fixtures and equipment with the exception of reasonable wear and tear.
Protection available to lessee cannot be availed by licensee
The practice of Leave and License is extensively followed in budding real estate markets such as Maharashtra and Gujarat. Simply put, leave and license is just a license to make use of a premises. As a result, landlords face a much lower risk as far as the recovery of their properties is concerned. Secondly, the laws that govern leave and license practices are far more lenient than those that are applicable to a lease.
A lease of immovable property on the other hand is a ‘transfer of a right to enjoy such property, made for a certain time express or implied or in perpetuity, in consideration of a price promised or paid or of money, a share of crops, service or any other thing of value to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms’. This means that unlike the ‘lease’ practice, leave and license practise does not transfer the interest or create any interest in the immovable property.
Under the earlier provisions of the Bombay Rent Act, 1947 landlords who did not require the premises for their own use were not willing to rent out their premises for fear of problems when it came to recovery. This created a huge problem for people who wanted temporary accommodation because the Bombay Rent Act provided protection to tenants. The practice of leave and license was then put forth as a solution to this problem and provisions were added which specified that in case where the licensee failed to deliver the possession of the said licensed premises on the expiry of the period of the license, he (the licensee) could be summarily evicted from the premises by a competent authority according to section 31D of the Bombay Rent Act.
As per section 7(5) of the Maharashtra Rent Control Act, 1999 is restricted to ‘occupation’. Therefore, a license can be said to be ‘a right to occupy an immovable property and use it for the purpose for which it is granted for a specified period of time.’ The Maharashtra Rent Control Act, 1999 by virtue of section 55 compulsorily requires this agreement to be in writing as well as registered. It is the landlord’s responsibility to get such an agreement registered. In case of a failure to register such an agreement, the landlord on conviction can be liable to imprisonment which may extend to three months or a fine not exceeding Rs five thousand or both.
The stamp duty on a leave and license agreement is levied as per section 36A of the Bombay Stamp Act, 1958. It should be noted that the stamp duty on a leave and license agreement differs according to the duration of the license and whether the agreement has a renewable clause or not. If, in addition, to the monthly compensation, a deposit is also accepted, then extra stamp duty is levied on such an agreement.
The terms of the agreement state the rights and obligations of both the parties i.e. the licensor and the licensee. Strict compliance on the part of the licensee is absolutely essential. Since the licensee is not a tenant and the protections that are available to a tenant or lessee are not available to a licensee. If there is no written, registered agreement, the contention of the licensee with regard to the terms and conditions of the agreement on which the license is granted shall prevail unless it is proved otherwise.
The most important advantage in leave and license agreements is that the landlord is the secure in the knowledge that he can easily recover his property after the license expires.
Leave and license agreement must be in writing
According to legal terminology, the term Leave and License is considered as a right to do or continue to do in or upon the immovable property of a grantor something, which would in the absence of such a right, be unlawful, and such right does not amount to an easement or an interest in the property. Before giving a premises on a leave and license basis, property owners should follow a number of precautions to safeguard their interests in the said property.
Firstly, they should make sure that the stamp paper should be in the name of the party to the agreement. The agreement should be drafted in writing referring to the particulars of the area of the premises, period of license, amount of compensation payable, amount of deposit if any and other particulars after which it should be countersigned by two witnesses. Under the Bombay Stamp Act, 1958, it has been stated that every agreement for leave and license or letting of the premises between a landlord and a tenant or the licensee should be in writing and should be registered.
After the commencement of the Act, there cannot be an oral agreement for tenancy or leave and license premises. The non obstante clause – ‘notwithstanding anything contained in this Act or any other law’ – gives an overriding effect to this provision and therefore it overrides the Transfer of Property Act, 1882, the Registration Act, 1908 and the Easements Act, 1882.
In order to maintain control over the premises, exclusive possession should not be given and only a duplicate key should be given. The original key should be kept safely with the licensor stating that under no circumstances should the key of the premises be changed. The licensor should also keep an affidavit of the licensee that discloses his full name and permanent address. The affidavit should clearly state that the licensee will vacate the premises unconditionally after the expiry period of the license and if he fails to do so, the licensor can get rid of his personal belongings with the help of the police.
The affidavit should also state that in the event the licensee prolongs his departure after the expiry of his license, the deposit amount given to the licensor by the licensee will also be forfeited and the licensee will be treated as a trespasser. Accordingly, he will also be liable to pay damages and compensation which will be more than two times of the agreed compensation with a penal interest at the rate of 18 percent or more.
Many homeowners resort to allowing paying guests in their premises for monetary reasons. Having an agreement between an owner and a paying guest safeguards the interests of the homeowner. Listed below are a few salient features that a good agreement between a flat owner and paying guest, should contain:
• The agreement should state that the owner is allowing the paying guest the use of one bedroom for their use only on a temporary basis and on certain terms mentioned later in the document.
• The period of the paying guest’s stay should be mentioned clearly plus the amount to be rendered plus a contribution to other charges such as electricity bill and society charges.
• The owner may allot to the paying guest any of the bedrooms in the said flat for his/her use with a condition that the owner can change the allocation at any time during the term of the agreement.
• The paying guest should specifically confirm and agree that they have no right whatsoever to the said premises nor claim to neither be tenant / sub-tenant or licensees nor claim any other right whatsoever to the said premises.
• They Paying Guest may use the passages in the flat for access to the room and may use the kitchen for cooking their own food only provided that no disturbance whatsoever is caused to the use of the kitchen and passages and other portions of the flat.
• The Paying Guest shall not cause any disturbance at any time and may permit guests or any outsider to enter the flat only with the permission of the Owner.
• In the event that the paying guest misuses any of the facilities in the flat or causes any disturbance or delays in making payment of his charges, the agreement can be terminated and the owner is entitled to enter the room allocated to the paying guest to remove all the belongings of the paying guest and dispose of them.
• The paying guest will be responsible for any damage caused by them or by any other outsider who has entered the flat through them and to any of the furniture, fixtures and equipment with the exception of reasonable wear and tear.
Protection available to lessee cannot be availed by licensee
The practice of Leave and License is extensively followed in budding real estate markets such as Maharashtra and Gujarat. Simply put, leave and license is just a license to make use of a premises. As a result, landlords face a much lower risk as far as the recovery of their properties is concerned. Secondly, the laws that govern leave and license practices are far more lenient than those that are applicable to a lease.
A lease of immovable property on the other hand is a ‘transfer of a right to enjoy such property, made for a certain time express or implied or in perpetuity, in consideration of a price promised or paid or of money, a share of crops, service or any other thing of value to be rendered periodically or on specified occasions to the transferor by the transferee who accepts the transfer on such terms’. This means that unlike the ‘lease’ practice, leave and license practise does not transfer the interest or create any interest in the immovable property.
Under the earlier provisions of the Bombay Rent Act, 1947 landlords who did not require the premises for their own use were not willing to rent out their premises for fear of problems when it came to recovery. This created a huge problem for people who wanted temporary accommodation because the Bombay Rent Act provided protection to tenants. The practice of leave and license was then put forth as a solution to this problem and provisions were added which specified that in case where the licensee failed to deliver the possession of the said licensed premises on the expiry of the period of the license, he (the licensee) could be summarily evicted from the premises by a competent authority according to section 31D of the Bombay Rent Act.
As per section 7(5) of the Maharashtra Rent Control Act, 1999 is restricted to ‘occupation’. Therefore, a license can be said to be ‘a right to occupy an immovable property and use it for the purpose for which it is granted for a specified period of time.’ The Maharashtra Rent Control Act, 1999 by virtue of section 55 compulsorily requires this agreement to be in writing as well as registered. It is the landlord’s responsibility to get such an agreement registered. In case of a failure to register such an agreement, the landlord on conviction can be liable to imprisonment which may extend to three months or a fine not exceeding Rs five thousand or both.
The stamp duty on a leave and license agreement is levied as per section 36A of the Bombay Stamp Act, 1958. It should be noted that the stamp duty on a leave and license agreement differs according to the duration of the license and whether the agreement has a renewable clause or not. If, in addition, to the monthly compensation, a deposit is also accepted, then extra stamp duty is levied on such an agreement.
The terms of the agreement state the rights and obligations of both the parties i.e. the licensor and the licensee. Strict compliance on the part of the licensee is absolutely essential. Since the licensee is not a tenant and the protections that are available to a tenant or lessee are not available to a licensee. If there is no written, registered agreement, the contention of the licensee with regard to the terms and conditions of the agreement on which the license is granted shall prevail unless it is proved otherwise.
The most important advantage in leave and license agreements is that the landlord is the secure in the knowledge that he can easily recover his property after the license expires.
Leave and license agreement must be in writing
According to legal terminology, the term Leave and License is considered as a right to do or continue to do in or upon the immovable property of a grantor something, which would in the absence of such a right, be unlawful, and such right does not amount to an easement or an interest in the property. Before giving a premises on a leave and license basis, property owners should follow a number of precautions to safeguard their interests in the said property.
Firstly, they should make sure that the stamp paper should be in the name of the party to the agreement. The agreement should be drafted in writing referring to the particulars of the area of the premises, period of license, amount of compensation payable, amount of deposit if any and other particulars after which it should be countersigned by two witnesses. Under the Bombay Stamp Act, 1958, it has been stated that every agreement for leave and license or letting of the premises between a landlord and a tenant or the licensee should be in writing and should be registered.
After the commencement of the Act, there cannot be an oral agreement for tenancy or leave and license premises. The non obstante clause – ‘notwithstanding anything contained in this Act or any other law’ – gives an overriding effect to this provision and therefore it overrides the Transfer of Property Act, 1882, the Registration Act, 1908 and the Easements Act, 1882.
In order to maintain control over the premises, exclusive possession should not be given and only a duplicate key should be given. The original key should be kept safely with the licensor stating that under no circumstances should the key of the premises be changed. The licensor should also keep an affidavit of the licensee that discloses his full name and permanent address. The affidavit should clearly state that the licensee will vacate the premises unconditionally after the expiry period of the license and if he fails to do so, the licensor can get rid of his personal belongings with the help of the police.
The affidavit should also state that in the event the licensee prolongs his departure after the expiry of his license, the deposit amount given to the licensor by the licensee will also be forfeited and the licensee will be treated as a trespasser. Accordingly, he will also be liable to pay damages and compensation which will be more than two times of the agreed compensation with a penal interest at the rate of 18 percent or more.
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